Global Trends in VAT/GST and Direct Taxes

S. 218I. Introduction

Value Added Tax (hereinafter, VAT) and direct taxes share the same problem of allocating the right to tax between different tax jurisdictions to avoid both double taxation and double non-taxation. For this purpose the fixed establishment (hereinafter, FE) concept is used for VAT purposes, while the permanent establishment (hereinafter, PE) concept is used for international direct taxation.

According to Art. 11 of the Council Implementing Regulation (EU) for Directive on the common system of VAT an FE is any establishment, other than the place where the taxable person has established his business, characterized by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to receive and use the services supplied to it for its own needs or to provide the services which it supplies. Art. 5 paragraph 1 of the OECD Model Tax Convention (hereinafter, OECD-MC), defines a PE as a fixed place of business through which the business of an enterprise is wholly or partly carried on.

The purpose of this paper is, on the one hand, to provide a general analysis of the concept of FE in EU VAT law by examining the criteria for the e...